Tax-Free Childcare Replaces Childcare Vouchers – Important Update

by charlottegw / March 15, 2018

From 6 April 2018, childcare vouchers were due to close to new applicants and be replaced by the government’s tax-free childcare scheme which is worth up to £2,000 a year to eligible parents. The scheme was due to be unavailable to new applicants from 6 April 2018, however there has been a six month delay.

The six month delay is due to an intervention by the Democratic Unionist Party (DUP). This is because the tax-free childcare scheme which is due to replace childcare vouchers has suffered a succession of problems. Glitches on the HMRC website have meant that thousands of parents have been unable to either set up tax-free accounts or access the money they had paid into them.

However, if they qualify, parents are still able to apply for tax-free childcare which is worth up to £2000 per year later this year. Each parent entering the scheme must be:

Over 21 and working

Each earning an average of at least £120 per week

Employed or self-employed

A parent may also be eligible if they have a partner who gets benefits such as the Carers Allowance, Employment and Support Allowance or Incapacity Benefit.

Eligible parents of a child under the age of 12 (or 17 if disabled) can open and pay money into an online account to cover the cost of childcare with a registered provider. The government makes a 20% contribution to childcare, so for every £8 paid into the account, the government adds an extra £2 (up to £2,000 per child or £4,000 if disabled).

Further help is available for eligible parents of three to four year olds in England where a total of 30 hours of free childcare has been available since September 2017. There are similar schemes in Scotland, Wales and Northern Ireland, but the number of hours is different in each nation. The eligibility criteria are the same as for the tax-free childcare accounts.

But what does it mean for the hairdressing industry?

The NHF’s CEO, Hilary Hall said: “The childcare vouchers were only available to parents who had been offered them through the business they worked for, so if parents worked for a business that didn’t offer the scheme they would miss out.”

She added: “This new scheme will really help stylists, barbers and beauty therapists with young children return to work. However, early years’ providers don’t have to offer the 30 hours of free childcare. The funding is very tight so many childcare providers are charging for extra services such as meals, pick-ups or drop-offs, which means your 30 hours may not always be completely free.”